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Should the United States Rethink Its Trade Policy?

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And welcome to the president's. INBOX is see if our podcast about the foreign policy challenges facing the United States. I'm Jim Lindsey Director Studies at the council so on Foreign Relations. Today's episode is part of the Special Election Twenty Twenty series on the president's inbox each week between now and the Iowa caucuses. I'm sitting down with two experts. Experts with different views on how the United States should deal with the foreign policy. Challenges it faces. We hope that these contending views will give you a fuller understanding what the candidates are in art saying on the campaign trail. This week's topic is whether free trade agreements serve. US interests With me discuss. US trade policy or Jennifer Hillman in Thea Lee. Jennifer is the senior fellow for Trade International Political Economy on him here at C. Afar and a professor practice at the Georgetown University Law Center. She served as a member of the World Trade Organization's highest court the Appellate Body. She is also served as General Counsel at the Office of the US trade representative among other US government positions Jennifer. Thank you joining me delighted and honored to be here. Is the president of the Economic Policy Institute. A washington-based think tank that focuses on the economic condition of low and middle income Americans in their families she was previously the the deputy chief of staff at the AFL CIO where she also held positions as policy director. In chief international economist she currently serves on the congressionally mandated. US China China Economic Insecurity Review Commission. The thank you for joining us today. Jim Thank you for having me. This is obviously a big question. It's also pretty complicated questions so I'd like to do. IS I. Start by. Sort of mapping out what the basic issues and challenges are so. If I could start with you Jennifer could you just sort of lay out for us a description of what. US US trade policy is in. Do we in fact really have free trade agreements well. US trade policy has generally been to try to open up markets around the world for for US goods for US services and for US products that contain intellectual property so those are typically the three basic elements that are covered in trade agreements and we say open up markets. What you really trying to do is to convince? Other countries to lower the tariffs that they have that affect goods to change the way in which they do or do not open up their market to services and the trade in everything from financial services to architectural services etc and then lastly to have have significant policies in place that would protect intellectual property so this would be patents or copyrights or trademarks trade secrets. So again do they have laws. That would protect those kind of rights. That might come out of the United States. So that's typically what a trade agreement looks to do to open up that market so that. US goods including eating agriculture and others can move across out of the United States and into those other markets. Chaos could a quick clarification. You mentioned services and I think for a lot of people. It's not clear. What services are you mentioned financial services? Could you give us some meeting the bones as to what we mean. We talk about services so generally services are considered those things things that are not tangible. Meaning you can't touch them so they're not a physical good. They're not like trading in an automobile or a piece of steeler piece of aluminum. They're trading in the service that often goes behind it. So commonly traded services would be things like financial services so if we want to do banking overseas I we can take deposits or for again have. ATM branches or even branches of our banks overseas. They're obviously not trading in just the physical good piece of money they're trading in the broader financial services but it can be an entire array of financial services so again it can cross a large gamut of services services are often hard to understand in the trade way because they don't trade in the same way that a good does looks good visit Musso was trade. It literally goes from one country and crosses an international border go into another country so you're Iowa soybean ends up on the plate in Beijing exactly where services trade in a lot of different ways I mean some of it can be as easy as the service of a say a a computer program that gets downloaded in another country so the service has traded by moving the service itself across the border but services can also be traded in a lot other ways if for example an executive accompanied moves across the border to provide the service of managing that company. That is a different way. In which services can be traded so there's generally considered four different ways in which services trades so in that sense. They are a little bit more complicated than goods. When you think about one other clarification that is our trade agreements often described as free trade agreements? What precisely does that mean? And are they really free trade. No they're not really free trade. What free-trade means though is you are trying to get to the point where the barriers to trade particularly the tariffs on goods and those are taxes on your taxes on imports so a tariff is attacks on import? The idea idea behind the free trade agreement is that you're trying to get at least substantially all of the goods that would be traded subject to no tariffs zero duty rates but tariffs aren't aren't the only impediment to trade in goods or services correct. Many of the most important of the barriers to trade in goods or services are regulatory barriers or other kinds of what are referred to as non tariff barrier. NTB's correct. I want to bring you in here. You have worked to shoot for very long time and you have been in. I think it's fair to say a critic of US trade policy to lay out where you see US trade policy falling down. Sure thanks for the question. So as Jennifer said trade policy is set of agreements between countries about the terms of competition and because countries have different regulatory systems they have different labor market institutions. They have different ways of regulating industry when they trade goods or services across borders. Often there is inconsistency or incompatibility in one of the things that we have to agree we do. A trade agreement is which of these inconsistencies. Are we going to try to address to have a level playing field or to have fairness across borders and argument would be our. I think the I would call it the global justice critique of US trade deals has been that US trade policy since pretty much since the NAFTA deal the North American Free Trade Agreement early nineteen nineties early in nineteen ninety s has been focused much more on corporate interests. Corporate profits corporate mobility and flexibility and freedom from regulation than it has been on other more more important bread and butter issues to communities whether it is worker rights or environmental protections or even consumer safety. So there's a whole maybe. Almost an infinite number of things is that we could negotiate when we negotiate a trade agreement and the criticism of us. Trade policy has been that the focus and the balance of the priorities of the. US negotiators has been too much on corporate interests. And part of what the outcome has been has been to reward and accelerate and exacerbate assar bait outsourcing rather than exports we talk about trade agreements that you're going to open up markets and reduce tariff barriers. But a lot of what. US negotiators have focused on has also been about how foreign investors treated in the country. You know whether there's investor state dispute settlement and as Jennifer said the treatment of intellectual property or even the treatment of financial services. So those kinds of things not to say aren't all important but that there's been an imbalance of things as opposed to for example focusing on things that might be important to workers workers. So if let's say workers at an auto plant in Michigan are facing a free trade agreement with Mexico. The question might be. Fair are the workers. Mexico afforded the same kind of rights and protections that American workers are afforded. Can they exercise internationally recognized rights of Freedom of association. The right to bargain collectively is child. Labor protected as forced labour protected. So I think that's a very legitimate set of questions. Important set of questions. It goes more to the quality of jobs to wages it goes to inequality and that's why oh I think there's been so much criticism of US trade policy over the last few decades. Okay so as I look at. I WanNa make sure you understand. The criticism isn't about trade per se. But it's about what rules should govern trade with other countries and that's where the debate is rooted exactly and that's why in some ways. The trade debate has been miscast as one between free trade and protectionism actionism. As though there's one thing called free trade which is clean and easy to describe and one thing called protectionism which is a lack of trade and I think almost all the arguments on the Certainly on the Labor and environment side have been we need a better balance of rules for trade deals not that we need to stop trading. So we're talking about the devil's in the details. And we're going to plunge into and the details in a minute but I want to get a sense from you. Because obviously the Economic Policy Institute worse than issues besides trade and it is really sort of focused on I guess the big big question of making globalization work for American workers and that is when you look at trade policy. You're critical. But how does trade policy. Let's see rank on the issues that you see as undercutting American workers. I think it's safe to say we have growing income inequality in this country a pretty evident wage stagnation but trade Isn't the only factor and you and you can. You've testified on a number of issues. Just want to get a sense of where trade policy fits fits in sort of the causal factors. You see undermining the American worker X.. Jim That is a great question and a complicated one. Of course so I would say that trade is an important right and factor not the only factor may not even be the largest factor that is contributing to lower wages and wage stagnation and inequality but it is in in some ways some of the other issues that we would see like the attacks on unions or the macroeconomic policy that has put too much focus on getting inflation nation. Dad But not enough focus on full employment and the erosion of the minimum wage and other labor standards and labour protection investment in infrastructure education skills. Those training in life all those things and technology to some extent. Also all those things together I would say in some ways. Have some of the same goal which is to undermine the bargaining power of working people. And that's why trade policy is. It's hard to separate the impact and to put a fine line even between trade and technology because for example if a company he is interested in outsourcing and technology is changing very rapidly. It may be that as more jobs go overseas or as cheap imports. Come in there's more pressure to adopt new technologies Jason so there may be interacting factors between trade and technological change for example but at the end of the day if almost had a doubling down like sometimes trade economists like talk about we could have freer trade and some people will benefit and some people will be hurt. Maybe the people will be hurt. We'll be let's say less skilled workers those without a college degree in the United States. That's maybe maybe. Two thirds of labor force pretty significant chunk of people and then economists say. But you could. It would be possible to tax the winners and compensate the losers and have everybody everybody come out ahead and the problem in. US politics is that not only. Did we not do that. We didn't tax winters compensate the losers it's almost like we use the tax code and we wrote to the social safety net get to tax the losers and compensate the winners and so you had an exacerbating inequality in many many different dimensions over the last couple of this for you is is an issue embedded embedded in a much bigger critique of the American economy. Exactly I want to draw on your experience here Jennifer because you worked at the. US Trade Representative you also. I mentioned that the outset. We're on the Appellate Body of the World Trade Organization but you're also. US ambassador. I think was his textile negotiations. He's helped me think about a how. US negotiators think about what they're doing when they go to these negotiations. Because you know obviously the late at a critique that the big picture going into these negotiations leaves lot out so I wanna get your sense of how it looks for more. You said Yeah because I I don't I don't disagree with some of what the has sat and clearly what we've we've seen sort of over time is that yes. The point of a lot of these negotiations is to open up a new market. And what you clearly do see is when you open up that door who walks through and what we are increasingly seeing is who walks through the door those with capital and those with no how and that does tend to push back then on the exact. What kinds of things that that? The is described as a negotiator. which you really trying to look for is okay? If I open up this door do I have American. Companies and presumably elite workers from the United States that are producing a product that can take advantage of that new market so for example when I was doing textile negotiators. We're we're trying to get a new market access and demarcus. That had never been open to us before you really wanted to make sure you were focusing on the items where the US did have a readily available competitive industry industry that could produce those exact products so that when you open that door they were right there and ready to move with you. The other thing that I was doing on the textile side was at the time we had quotas otas on imports And so part of that job was trying to think about how do you distribute those quotas in a way that would be helpful not just in terms of of protecting the US market in the most sensitive sectors where there was the most vulnerable but also trying to figure out across the board with your various trading partners. Involved where are you you allocate and quoted that makes the most sense from a development standpoint or others. How do you make sure that there is room for Haiti or Jamaica or for a number of other other whether it's Bengladeshi others to get into our market and part of that was by keeping the levels that you were going to permit from China or other really large countries at the the lowest level that you could in order to make room in the US market for a much broader array of imports? But I would imagine you're in a bid of a difficult spot because you're trying to negotiate a deal and that means you have to get concessions from the other side but you also have to give concessions but at the end of the day you also isn't simply simply enough to get agreement from negotiating partner you have to bring it back to Capitol Hill and get members of Congress to sign off on these deals because Congress has the power our over foreign commerce and my sense is that that can be a very difficult needle to thread given that a deal that will alarm one party. Congress will make another part of Congress. Congress really happy. So how do you think about the politics and I would say. The politics are really different. Depending on whether you're negotiating bilateral agreements or multilateral agreement. Chris Boucher lateral just wanted to partner. which is one other country? And what you find and I think if you look over time with bilateral agreements. There's less to trade leadoff again. I think it gets harder. In terms of building a constituency for it and then on the other end of it and also becomes very clear that a lot of the debate on Capitol Hill about whether you want to agree to that agreement really does depend on how members of Congress feel out or think of that particular country so it becomes very much a sort of do we like Colombia Lumbia or not. Where are we in terms of? How do we think about Peru or not as opposed to a multi lateral agreement when you do a big multilateral agreement like the Uruguay Round that led to the development element of the WTO? The thinking much more on the wall. I like the agreement on agriculture. I don't so much like this. Other provisions I may like the Provisions on textiles and clothing. But I don't don't lie the provisions on something else and it tends to be much more focused on on these trade offs that were made among sectors again within the US economy. More than focus. On whether there I like a particular country or not so very different dynamics there but your basic question pushes to the view of the they agreements have to be big enough and significant enough to have a lot out of these trade offs in order to get support to get them pass through the Congress. You want to jump in here. Sure and I think Jennifer's raised a number of interesting issues and one of them is that our trade policy alcee sometimes also is development policy or foreign policy. You know trying to balance the interests of different nations or trying to decide which nations are more worthy or more deserving of a trade agreement and what are the criteria that we apply should the country be a democracy should they respect basic human rights. Should they Have LGBT rights and rights for Women Environmental Protection Section our mental protections and. How do they treat their workers? Are the wages low. Because it's a poor country or the wages low because the government goes out and busts union throws people in Jail L. and maybe looks the other way when when you leaders are assassinated. Those are pretty important questions. And it's one of the things that we've been battling about for the last couple of decades in the United States around trade deals is you you know how do these countries get chosen and really part of the issue and I know Jennifer is a very seasoned trade negotiator and I a lot of respect for our trade negotiator part. You've been to who long trade negotiations as an observer so I have I you know representing the AFL CIO as a on the Labor Advisory Committee and other places be part of it like a big uh-huh multinational labor delegation often at the World Trade Organization in particular but also for the bilateral and the regional trade deals so our negotiators are balancing a lot of different it concerns. They're balancing whether they can get this through the US Congress or not and sometimes these things happen in too much secrecy. And that's been one of the criticisms over the years that I think the civil society groups want to open things up more. They want more access so that they can see if there's a problem precisely for the reason that Jennifer said which is that by the time the deal comes to Congress. It's an upper down on vote. Almost always it's a fast track. Vote where Congress can't say. I liked section one but not section. There's a reason for that because back in the old days when you could amend it everyone would say I love the deal Except for exactly and it would all come unraveled. But that's I think a good reason and argument for having more transparency as deals negotiated. Because if there's going to be a problem and sometimes times negotiators are not you know they're not all seeing they're not omniscient they can't read everybody's mind but if you raise something say oh my gosh. I had no idea this was going to be a super hot concern for a lot of people but I think one of the thing I would just say in terms of trade deals about opening up markets and who walks through the door but it's also true that for the United States are consumer market is extremely attractive to pretty much every other country in the world so when we enter into a trade negotiation of bilateral or regional negotiation with another country. We have a lot of clout and and our government has tended to use that clout to extract concessions that are good for multinational corporations and maybe better for outsourcing than they are for for exporting in many cases not all but many cases and I think that's been one of the crux of God not though because obviously corporations employ people and and so. If you're an American who works for one of these corporations. This is important to your livelihood so I mean how do you think about this issue. 'cause obviously this is something in which decisions have consequences sequential. Some people do win. Some people. Don't win well. One question is is the corporation going to serve that market by producing more stuff in the United States with American workers and pay them good wages or are they going to serve that foreign market by moving production. Let's say of an aircraft to another country producing they're hiring people there and the people who who are left behind the community that's left behind is devastated. Many cases and the tax base is devastated so it isn't even just the people who worked at that factory. It might be the teachers and the firefighters and the police that also misses a multiplier effect and so it is complicated to try to unpack what corporations interest is from what the community's interest and I guess one of the lessons I have from many decades of being involved. These trade deals is that you cannot assume that the corporation is going to make a decision. That's in the best interest of its workers and its communities. They Mike but they don't always I want to ask you just one last question. Mark Process Jennifer and that's the issue erased about transparency. I can see the argument for transparency. Certainly on the basis of democratic principles by also imagine that if you're trying to negotiate something transparency can make your life miserable and so the question is how do you view this issue of transparency insperity. Well I think you don't need a lot of transparency at various points in the negotiation. I'm not sure you need it at every point. I think he is absolutely right. There ought to be a lot lot of transparency. When you go to choose the partner that you're going to enter into a negotiation wish there ought to be complete an absolute transparency to look at? Do we want to do an agreement with whatever the other country may be. I also think there ought to be an awful lot of transparency around the issues of what are going to begin the chapters of the agreement. What subjects are you covering? Are there certain subjects that we should not be covering. Are there additional subjects that ought to be included. There's no question that I think that would go a long way when you get down to the actual text of the negotiations. I think there needs to be actually some period of time in which there isn't full transparency because it simply is not very possible to have every single person knowing exactly every offer an every every counter offer in terms of actually trying to get there but once you got the parameters set with a great deal of transparency let the negotiators do their work. But then I agree with the on the back second on there needs to be a lot of transparency. Once you've got the agreement before it gets translated into actual legislation that would go to the Congress so I'm not disagreeing that there needs to be more transparency. I think than just want it in the right places. Yeah well I think one of the issues with transparency is that we have a system for these advisory committees. The trade advisory committees that are severely inbound towards corporations. There I think seventeen of the industry sector advisory committees and only one labor and now one environment committee and one the things that we've been fighting about over the years shouldn't there be labor environment consumer representatives on each of the corporate or the Industry Sector Advisory Commission. Just a quick question. The WHO setup those those are part of law there's a part of law. They're established in the the executive branch. I think generally makes the the appointments to them. I've been on the Labor Advisory Committee for many years. I'm not right now because I'm not working labor movement anymore but there's that one little the Labor Advisory Committee but we want it to be on the Auto Advisory Committee on this Services Advisory Committee on the chemicals Michaels and the paper and because their decisions that are being made by only corporate representatives. And that I think is the wrong kind of transparency. The exact point at which you make like everything available I think is a good question. The real thing that needs to be kept secret in a negotiation is your bottom line. That's what you don't want the other side to know like I would go down two point the two percent and that's never been made available so I've had more access to transparency and to documents to the negotiating documents as part of the Labor Advisory Committee. And most it's not that scary. Most of it like ninety. Eight percent of what is shown to the advisory committees is the same text from the last trade agreement because that's how negotiators tend to work is that they start with the last one and they work forward but part of the problem for me was it. Even if I saw something that was troubling there. I could not tell my boss. I could not tell my members I could not tell a the journalist and that I found very constricting. What I'd like to do is to move off this process question and actually talk about actual trade agreements and maybe we can begin with the World Trade Organization since the umbrella organization for the International Trading System? At my sense as you have very different views on the World Trade Organization Jennifer. You sat on the Appellate Body. I know you have criticisms of the WTO but you're also worried that may be soon paralyzed and unable to operate. Let me is your flesh out your case for the WTO well for me the key thing that the WTO does is establish some really important baseline rules and the most important to me. We are the rules that say that you cannot discriminate on the basis of nationality. The so-called Most Favored Nation principle and to me that's absolutely critical for US companies and and US goods and services that trade around the world that you cannot be just discriminated against simply because it's American and therefore I'm GonNa put a different tariff for therefore I'm GonNa ban it or therefore therefore I'm GonNa do something with it solely on the basis of that nationality and the other to me bedrock principle of the WTO. That's very important is the concept of national treatment meaning you cannot and not discriminate against a foreign item simply. Because it's foreign those are I think really important rules that help establish some stability and predictability in the trading trading system. The rest of the rules are going to go into the details of every sector. What I think is important to understand? Is that the. WTO works by schedules. Those words you can put tariffs on at whatever level you put into your schedule. No one makes you put in a particular tariff level. That's the subject of your own sovereign Auburn decision and as a result of the negotiations that you've had with everybody else similarly for services yes there is a general agreement on trade in services in the WTO but does does it make you open up your market to services. No you allow as much trade in services as you put into your own sorts of framework under which you can operate it exactly. It is a framework under which you operate that has every country having a lot of rights in its own sovereign space determine what it wants to do but subject to these bedrock Iraq principles that you cannot discriminate on the basis of nationality. And you cannot discriminate against foreign just because it's four with those basic principles under girding it the rest of it. It is a lot of very specific sort of sovereign decisions and then again some very specific decisions around transparency. If you're going to impose a measure that says I'm not going to permit imports reports of apples because I don't WanNa particular disease that is in Apple's you have to tell the world that that's what you're going to do so the framework is one that still allows a lot of of of sovereign rights to be exercised within it and yet it has rules that give predictability and certainty to everybody and to me most importantly the WTO then becomes a forum room for discussion. Of what exactly are everyone's rules and a forum to resolve disputes over disagreements. About whether or not you have effectively taken away writes that I believed our country believes that it has under the rules. The I know you're a critic. So what is your criticism the WTO is it that you want it reformed or do you WanNa replaced reformed and actually believe it or not. I don't disagree with a lot of what Jennifer said in terms of the usefulness of having a format for multilateral rules and in fact if I our queen of the world I would want more emphasis to be put on the multilateral rule-making unless on the bilateral and regional which I think does create what we sometimes call the Spaghetti Bowl of different rules and provisions in someone that would be more efficient if we could agree part of my criticism of the WTO has to do with what our own government with the United States. Government hasn't hasn't done in terms of setting priorities priorities. For what is it that we need to do together. In a coordinated way across national borders that we cannot do as individual countries. And I think there are a lot of issues that should be on the table the WTO that have not been obviously core labor rights. which is something? I've mentioned before but also currency manipulation or currency misalignment even the WTO in principle has ruled to address that they've been paralyzed and unable and unwilling to settle some of those disputes. I think another issue would be climate change where where countries acting by themselves without coordination are not going to be able to solve the global climate problem. They need to coordinate and that needs to be made clear through WTO rules. And I know Jennifer has looked at this that if countries want to move more quickly. Let's say one country wanted to move more quickly to reduce carbon emissions. That country shouldn't be penalized by having all the industry move out to a dirtier place because that actually it's inefficient and it will increase global emissions. If we don't allow some border adjustment mechanisms take place but with respect to labor standards. This is a clear lack at the WTO the WTO talks about subsidies. They talk about tariffs they talk about as Jennifer. I never said the principles of national treatment and non-discrimination and yet let's say for example one country. You have very stringent rules that ban child labour in another the country has no rules on child. Labor so small children are chained to a loom and enforced labour slave labor force to produce cheap garments. Should the first country creepy forced to import goods made by child slave labor the WTO does not speak to that. It has no rules on that. There's a rule on prison labor but not a rule on forced flavor and not a rule on child labor and not a rule on some of the other very basic internationally agreed rules on core labor rights that the International Labor Organization in his age so Jennifer. Why doesn't the WTO tackle these issues? I think it's mostly historical and then nowadays I think it's very hard to get new agreements on anything brought into the WTO. So again I think part of that is it came out of This General Agreement on Tariffs and trade which basically focused solely on goods and solely on tariffs and then in the nineteen nineties. There was a negotiation this Uruguay Round negotiations that led to the creation of the WTO. And at that time I think it was still considered actually quite controversial. Okay include Labor or the environment directly within trade agreements. I think we've moved a long way from there. Obviously we are seeing in trade agreements around the world the inclusion now how of Labor and Environment Provisions but at the time this was negotiated. I think that was that was not considered an appropriate part of a trade agreement. Probably by mistake and the second thing in terms of labor was a perception that they're ease the existing International Labor Organization and the presumption is the WTO would do trade and the ILO would do labor. And I think as the is pointing out very clearly that has not worked and that the only way that you're going to get more effective real effective disciplines on labor rights to bring them into the WTO and the reason for that comes to the fact that is the WTO that has binding dispute settlement mechanism. And it has the ability to actually through the form of Trade Sanctions Shinzo tariffs to actually put some teeth into whatever the rules are so I think the both the politics of it and the understanding about it has changed over time and yet right now the. WTO is at a place in which it's been hard to reach any agreements on any new subjects since nineteen ninety-five and therefore think even though there may be much more of a sentiment that it would be appropriate to bring in these labor disciplines. You cannot get those kinds of agreements right now I want to move away from the WTO and talk about. I wanted to say one thing before for before we do move away from the wgn which is historically interestingly enough the precursor to the General Agreement on Tariffs and trade the IT Oh the International Trade Organisation actually did include labor rights so that that was a missed opportunity. That happened many many years ago. That could have been for all of us. Were born long before we were born that that there was some movement and and I think some justification in some understanding that labor rights is or labor standards is a form of international competition that there would be an advantage to having some floor some some minimum standards. That were agreed across national borders. Let's talk about Nafta which has been a big issue in the trade space for a long time going back to the early one thousand nine hundred and I will note that I've had the pleasure of living in a variety of parts of the country. Having lived in Michigan traveling there frequently. I know NAFTA's very unpopular pop very unpopular in much of the rust belt. But I've also lived in Texas where there are a lot of fans of NAFTA this gets back to the question of winners and losers from trade deals does the layout for as you're critique of NAFTA Y. It was not a good idea sure so the North American Free Trade Agreement was negotiated between the US Mexican candid handed in one thousand nine hundred ninety s originally buy the George Herbert Walker Bush administration and then finished by the Clinton administration. And this was I think the first trade agreement with a developing in country because the US had a FTA with Canada and with Israel at that time but Mexico. This was a new thing and the question was what was the goal of Nafta and some of the negotiators at the time. I did a lot of debates about NAFTA THE TIME I was a trade economist at API talked about this was about basically disciplining Mexico and and trying to make sure that at four American companies that wanted to move production to Mexico that they had what they would call fair treatment that electoral property rights protected. And that if Mexican courts treated them unfairly that they would have recourse supernational recourse to this investor State Dispute Settlement Mechanism so it was conceived to take tariff barriers down but it really he was always an outsourcing agreement more than it was an export agreement so the public debate about NAFTA was all about. Oh don't you want to sell goods to Mexico on our southern border. And of course everybody wants to sell goods exports. Good experts are good for Labor. They're good for business but the subtext was about moving production and not selling goods. And if if you look at the thousand pages of Nafta it was negotiated for outsourcers not for export sued Labor Environment Provisions that were added by the Clinton administration at the very the end. Were very weak and they were not enforceable and they didn't cover the key issues and so it was always a lopsided agreement that didn't do enough that was designed to accelerate outsourcing thing. And it did so. Do you think that the revised Nafta the US Mexico Canada Agreement US MCA. Does that address that concern because I know one. The negotiating points for the trump administration was getting content rules increase of that more of the sort of inputs had to be manufactured in the United States states. The New Nafta the US MCA certainly addresses. Some of the concerns. That were raised at the time. Some concerns that have made Nafta so unpopular over the last couple of decades. I think there's still an open question question. About whether some especially Labor provisions and the rule of origin provisions are enforceable and will be implemented fully. And so I think that's what the core of the dispute is at the moment in. What is your assessment of the US? MCA Jennifer well again. I I look at it to say compared to what to me compared to what we would have had if we had simply stayed in the NAFTA FDA and then added and stayed in the TPP Which trans-pacific trans-pacific partnership which has a lot of the provisions that are now in this new? US MCA were lifted entirely from the TPP and put into this new USMC that combination to me might have left us in a better place than this new. US MCA agreement does does but nonetheless is this new. US MCA agreement. Better than leaving us at the current Nafta yes I think it is and part of it is it does. Have I think some new provision even with respect to autos with respect to this adding in this concept at a certain portion of the amount of an auto has to be produced in a factory that has a sixteen dollar an hour minimum wage which I think is bringing in a new provision it is pulling the Labor and the environment provisions directly into the agreement so that if you get the enforcement provisions right and I do say af then there is a much more real mechanism by which you can make sure that the labor and the environment standards across the United States Mexico and Canada are actually adhered here too. I just WANNA be clear here. Is there anyone arguing. We should just leave NAFTA entirely and go back to what existed pre nineteen ninety two. I think it's very hard to do that at the stage stage because you can't turn the clock back and I think there are a lot of business relationships that have developed over time so that's hard to imagine that that would be a useful way of going but I think there there are people who would argue. We could do better than if we wanted to. Renegotiate Nafta Sentences Democrats in the house. You're trying to do. They've been going through the sort informal additional renegotiation process. So it's more forward looking in terms of this isn't as good as it should be there. I think some very problematic provision with respect expect to pharmaceutical products that this agreement will actually raise prices of some pharmaceutical products and boost the prophets of some of the wealthiest companies in the world. So that well. That was a big sticking point in negotiations because my sense was the Mexicans and the Canadians weren't big fans of those provisions fierce. I absolutely fair to say which means you know if the Democrats really push. I think one of the easy fixes would be to lower that timeframe under which is just yet biologics. I'm not sure what a biologic is. Even though I've tried like reading about it several times for the notion was how long this particular type is. How long you get would be protected effective protection meaning? How long are you protected from any competition and again the longer longer you protect any molecule pharmaceutical anything from protection? The longer it is before generics are others can come in and push down the prices so I mean he is absolutely right the longer at that time period is the more expensive pharmaceuticals are and would Canada and Mexico agreed to lower the number. Absolutely yes so that is one of the things that could come out of these negotiations associations but my sense is for a few senators in particular. This is like a red line. They had to get there. Was it eleven years of protection there are always people in Congress who are more interested in the prophets of the pharmaceutical companies than in lower prices for consumers we mentioned TPS WANNA talk a little bit about TPP. President trump notably announced three days. It was presidency that he had no interest in pursuing. TPP there is the irony of the Lord of the chapters in the trans-pacific partnership did end up in the US MC l.. Up Put that aside but I guess the question is we look at the T. p. p. is it something that should be revived and I ask it in the context of the fact that I think a lot of people fought back in January twenty seventeen when the United States walked away at the. TPP would just collapse that would be the end of it. But what happened was the other Levin negotiating associating partners put together something called the CPT p p the comprehensive in progressive trans-pacific partnership and one of the interesting things about that was that that then put a number of American exports whether manufacturers were farmers on the defensive because all of a sudden they're good became less competitive in that particular ticker market. So how do you think about those trade offs there well it wasn't just trump who didn't like the TPP in fact you know the entire Democratic field and most of the Republican field and a lot of members of Congress Congress also did not like the TPP so in my view. This was a missed opportunity by the Obama Administration. USTR negotiators that it you know. We didn't agreement agreement with twelve countries. Many of whom we already had free trade agreements with and so it was an opportunity. I think to really do a new generation trade deal that would have have put some of the Labor and Environmental and consumer concerns front and center and instead it was a little bit of an old school. Deal that in my view if it was our pivot to Asia did not address some of the key concerns that the United States has both in competitive terms and in foreign policy terms with Asian countries around currency negotiation and around worker rights in particular. So so I think that that agreement was the failed agreement and was negotiated on the wrong basis. And it's too bad that that that opportunity went by. But I don't think gets possible or desirable at this point to revive that old deal. So what is your sense. I I assume you can't go right back to. TPP My senses the members of the C.. P. T. p. p. walked away away from a number of the United States insisted on because they didn't like a particular this issue about biologics and how they're protected. So how do you think about this issue Jennifer well I actually think the CPT PTP is actually a better agreement than the TPP because of the things that were stripped out of it so my own view is it is still I mean the CPT P. is closer to an agreement agreement that the United States should want and I always thought that there was a possibility that it could have been improved as it went through the process and I would certainly not disagree with the on on some of the things that would have improved it. I still think there would be a possibility particularly the I can. The provision for example on investor state dispute settlement again. I'm not disagreeing. Those could have been strategy so briefly explain settlement so investor state dispute settlement is the provision that allows a private investor who has made an investment in a foreign country to claim that foreign country has done something that has effectively taken away that property right either. They've literally expropriated the property or more often they've passed a regulation. Say You've invested in a mine and now the country in which the mine is located passes environmental regulations that you think makes it effectively impossible for you to ever operate your mind so you now have the right. As a private investor to seek a dispute settlement provisions where the government of the country is in the docket to say. You've taken can away my property. Right you have to pay me X. amount and rather than going through local court exactly and that's the point it is privileging a foreign investor and giving them A. Yeah right that the same domestic investor would not have if it were a domestic. I can see why that would erode investor in the mind they would have gone to the domestic courts and so so the issue is whether or not those provisions should have been in the TPP and the argument is always it depends on the quality of the courts in each one one of those countries whether you think they are up to the task of rendering affair judgment. I don't think there was a particularly good argument for many of the countries that were in the TPP. I don't I think we have any reason to question the liberty of the courts in Japan or Australia New Zealander many of the other. TPP countries candidate CETERA. So I think that provision could've could've easily been taken out and that would have been taken out gladly I think by most of the other members of the TPP and most of the US critics many of the US critics would have welcomed L. combat and have been arguing that this provision investor these private investor rights are bad governance there anti-democratic and they can often have been used is to undermine legitimate environmental regulations. And so that's why they're very controversial and have been there. I want to come back to a little bit of a process question. which is the use of tariffs obviously with the trump administration? We've seen a resurgence in the use of tariffs as a lever against trading partners. We've also oh seen the invocation. I think fairly unusual ways of provisions of US Trade Llamas notably section two three two which is a provision. I guess it goes back. ACT TO TRADE ACT of nineteen sixty two that allows the United States to impose tariffs for national security reasons. And I'm just curious theatre from your vantage point. has this been ineffective tool of us. Trade policy tariffs can be an effective tool in their necessary tool of trade policy in some ways. What a tariff is is a cross border enforcement mechanism awesome? So if you have trade agreement with a country and you feel that that country is violating the terms of the agreement or unfairly subsidizing exports or locking your exports then and you can use tariffs on a surgical and consistent and transparent way be current administration's tariff policy. I think has been radic and inconsistent badly messaged and done in such a way that it's just more confused. It's confusing to businesses. It's confusing to government and it has not been effective but in the abstract tariffs tariffs are perfectly legitimate tool and a necessary tool of trade policy. I think to some degree it really depends on what's the point of the tariffs and I think part of the reason why this has been and so confusing and chaotic is. It's really hard to tell. There are times when you listen to president trump. Say I'm a tariff man. You get the impression that he thinks that the tariffs are. You're actually the goal of the whole point of this is to build a tariff wall around the United States and so that if you have a big high tariff wall around the United States than anybody that wants to sell something in the United States has to make it in the United States. I think there's huge problems. If that's what you really think huge problems first of all you have to think about who pays these tariffs tariffs. The President may say I'm GonNa just tax China but the reality is it is Americans they pay the tariff and that is a huge tax on Americans I mean the trump trump tariffs so far you know are costing the average American family over four thousand dollars to pay the taxes that are put on imports. So part of it is again that we have to remember who pays the tariffs but the other part of it has to be. What's the goal of the tariffs? I would agree with that. They can be when properly used an important source of leverage. But if we think about what's happened. For example in the two thirty to the steel on the aluminum tariffs none of our allies. Actually believed that these were legitimate. I mean to say hey to Canada or to the European Union Japan you threaten the national security of the United States these are our strongest allies and we tell them you're threatening our national security. Their response was to put tariffs back on. US good so instead of helping. Those countries changed their practice which was never the goal of those tariffs on there was it was never the goal to change. Changed the practice of the European Union in terms of steel trae their responses to retaliate. And so now we have tariffs against the United States and again against heavily against farm arm products coming out of the United States so in Harley Davidson motorcycle significantly hurting the US farmers the export is of Harley Davidson and whiskey and other things that are now the subject of these retaliatory tariffs that were put on because these countries did not believe that the United States was engaging in legitimate use of tariffs other perception. was that these were wholly a violation of WTO obligations and were wholly illegitimate and so people responded. Countries responded very quickly to what they perceive to the an unfair illegitimate attack on their economies. And so we've ended up in this tit for tat tit for tat and again it is Americans that are paying the price of well. Sometimes in terms of who pays the price at actually is a little bit more complicated because it depends on the price elasticity of demand it depends on the mark those role economic are not going to define here. Yeah but sometimes company for example can choose to swallow the tear for a period of time and not pass it along to consumers. So it's a little bit more complicated than who who actually pays in any one instance the other thing. I think that's important portent to note. Is You know what are the legitimate uses of tariffs and another one might be to safeguard and industry temporarily for short period of time in the United States most countries in the WTO there are provisions in the WTO for that legitimate use. That an industry is losing a lot of jobs really quickly and we have a safeguard tariffs that we are allowed to use for. A limited did period of time to let that industry get back on its feet so it's important to remember that there are times in which we've all agreed that we should be able to use tariffs and the other point I would just make in this context is that certainly the labor movement might think that the you know the terms of the WTO are too narrow in terms of when it a tariff is legitimate so the example I used before about whether there's there's egregious abuse of workers rights we do have the ability to use unilateral trade preference programs to temporarily impose tariffs to basically to protest the violation relation of workers rights that is undermining the trade relationship or the prices one less topic and I probably aired leaving this to the end because maybe the biggest of all has has to do with. US trade policy toward China. I have to ask them. And maybe I'll begin with youth the as you look at this again given your servers on the US China Review Commission. How do you think about the current trade war is it something that is likely to produce a net benefit for the United States? What is it that we should want from China in in terms of trade policy? It's a complicated question. But thanks for asking the U. S. China trade relationship has been very frustrating for many decades. And it's been very imbalanced. We have about a three hundred seventy five billion dollar trade deficit with China which I think I know. People don't want to focus too much on bilateral trade deficits but in the US China instance that enormous enormous egregious trade. Imbalance is a sign that there are a lot of unfair trade practices on the part of China. So one thing we've learned through the you know the current trade war is that in this sense. Some of these hard hitting mechanisms work in terms of getting the attention of the Chinese government and focusing but as I said before that the trump administration's creations tariff policy has been so erratic and so confusing. And so stop and start where it seems to be domestically politically motivated by. What's going on at home? And if we need a distraction attraction from something else and that's not a way to use if you could if you could devise The policy what would you want to achieve. What you want the Chinese to do that? They're not currently. Overtly doing two things. I think. That's another reason why the the current tariff policy is not ideally crafted. I do think we need to deal with the currency misalignment between the United States in China. And this is something. Where if we put all of our trade policy on tariffs and subsidies and yet another country has ways of manipulating or using currency then we are kind of missing the boat and I would say that is a big chunk of the? US Problem China there's legislation been introduced the Holly Baldwin Legislation That would start to address US currency issues and the other issues workers rights and when I worked at AFL CIO WE. We filed to section three hundred one unfair trade practice cases against China on both workers rights and currency talk to me. Those are the two areas that the US government ought to be focusing. Do you think the China's currently manipulating. It's currency to get an advantage. I think the US China currency the is misaligned which is different from whether there's active manipulation right now but you know because of the genucel that means that would mean sea misaligned that the US dollar dollar is overvalued relative to the Chinese currency because the Chinese government holds a lot of reserves of US currency. They're not actively intervening today but there is a misalignment alignment between the the values which means that. US goods are too expensive. Chinese goods are too cheap. You would prefer to have a weaker dollar. Yes and then the variety ways to get that we won't do the whole economics one. Oh one or four one explanation that Jennifer. How how do you think about this? China trade war issue also in the context of the present talk a lot about reciprocity. That's the process that he wants reciprocal relations which sounds very appealing. Everybody to countries should play by the same rules. So how do you think about all this well. Part of it is I I'm concerned about how do we get any kind of an agreement with China so so my basic argument all along has been. I think it is going to be Ni- onto impossible for the United States to get An agreement that will be helpful to the United States. When we take this? Go it alone approach. I think we're seeing the limited value of the tariffs that we have right now. I mean this phase one agreement that is being talked about between the United States and China was described to council on foreign relations event by former US tr. Mike Froman as a purchase and sale agreement. Meaning it's not really a trade agreement that is going to address the underlying issues. It is to get the Chinese to buy more Chinese to buy more American goods but it is not going to resolve any structural problems. The exactly exactly I would not disagree with the list but I would add to it. You know the third issue that we really have have to deal with with. China is the degree of state owned enterprises and subsidies and the degree to which the Chinese Communist Party runs the economy and that is unfair competition for us. This companies to be expected to compete full on with the entire government of China that is propping up lots of state-owned enterprises and is sending in lots of goods that that have been subsidized and is creating massive overcapacity in China in steel aluminum in chemicals in many other products that are being produced on the backs of huge Chinese any subsidies so those are big and important issues. That will not be touched by this phase. One agreement and I don't think there's any way that the. US has enough leverage to get China to touch them at all we need a big coalition with our allies who agree with the United States is substantive concerns about China. But they do not. I agree with the United States is unilateral tactics and for them. The fear is if they were to try to join with the United States. They would then be if you will sold down the river if the US takes is an agreement that says China just by more of our stuff and we'll be satisfied that is completely leaving them out in the cold from that so my concern is we really do need a big league. And and structural agreement with China. And we'RE NOT GONNA get it with a go. It alone. Unilateral approach totally agree with that. I just I just want to say I think that you know the the unfair trade practices and one of the reasons. There's so much frustration now. Is that past administrations. Both Democratic and Republican failed to address this massively unfair trading practices offices subsidies state owned enterprise of the Chinese government. And I also agree with you Jennifer that this policy would be much more effective. If done in concert with our allies. I have a sense. We've come full circle Michael here. We ended up talking about the rules of competition. I think we talked about it. The opening the trade is really fundamentally about setting the terms of competition so on on that note of being full circle in having some agreement on an enclosed up this special election. Twenty twenty episode of the President's Inbox from this week. My guess again have been Jennifer Hillman. CFR's senior fellow for Trade International Political Economy in Thea Lee President of the Economic Policy Institute. Jennifer anthea thank you very much joining me for today's conversation. Thanks so much for Heaven Sakes I have posted links to what Jennifer Thea and others have written about trade on my blog. The water's edge. You can find the blog at sea are afar dot org again that's the water's edge on C. Afar dot org if you're not already subscribing to the president's inbox. I hope you would consider doing so. You can subscribe to it on Apple podcasts spotify modify or wherever you listen whichever podcast service you use. I also hope that you would consider leaving US review as well as your suggestions were topics to cover in which guests to invite their feedback. Feedback helps US improve the show as always opinions expressed in the presence in virtually those of the host or guests not see far which takes no is to shift positions. Today's as episode was produced by Zoe. Call US senior producer. Jeremy Shirley Anthony. Barry was a recording engineer. Special thanks to Mar Gach for her assistance. This episode of presence in Fox's made possible in part by a grant from the Carnegie Corporation of New York. This is Jim Linda. Thanks for listening

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